No Penalty for delay in deposit of Employer Provident Fund during Lockdown

Relief to establishments and factories covered under EPF and MP Act, 1952 from levy of penal damages for delay in deposit of dues during Lockdown to prevent COVID-19.

A relief to formal sector companies, the Employees’ Provident Fund Organisation (EPFO) on Friday decided not to penalise employers for delay in depositing provident fund (PF) dues during the lockdown. It also clarified that companies will get the benefit of a lower EPF contribution regime as announced by FM

In view of the prolong lockdown announced by the Government to control the spread of COVID-19 pandemic and other disruptions due to Pandemic situation, the establishments covered under EPF & MP Act, 1952 are distressed and not able to function normally.

once entity file their returns, known as ECR, they must also subsequently submit the EPF payments of employees at one go. Not doing so attracts a penalty

The Hon’ble Apex Court of India in McLeod Russel India Limited Vs. RPFC (2014)15 SCC 263 has underlined the broad contours and essential elements of section 14B of the Act and held that mens reaor culpable state of mind of the employer. is a sine-qua­nonfor inviting damages under section 14B. In other words, the provisions of section 14B would get attracted only when there is a positive evidence of mens rea on the part of the employer while committing default in timely remittances. This legal position has later been reaffirmed in Assistant Provident Fund Commissioner vs. Management of RSL Textiles. (CA 96-97 of 2017)

Considering the difficulty faced by the establishments in timely deposit of contributions during the period of lockdown due to operational and economic reasons, it is evident that such delays are without mens reaof the employer. Thus, the delay in deposit of contributions during the period of lockdown announced in terms of the Disasters Management Act, 2005 cannot be attributed to any culpable state of mind of the employer and will not, therefore, attract the provisions of section 14B of the EPF Act.

Therefore, for any delay in payment of any contributions or administrative charges due for any period during the lockdown. No proceeding should be initiated for levy of penal damages in such cases.

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